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Lifting fuel subsidies will increase food prices

  • Food Security Outlook Update
  • Sudan
  • September 2013
Lifting fuel subsidies will increase food prices

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  • Key Messages
  • Current Situation
  • Updated Assumptions
  • Projected Outlook through December 2013
  • Key Messages
    • Recent rains are insufficient to compensate for the late start of season in high-production areas of eastern Sudan. Rains must continue through the end of September for late-planted crops to mature, and below-average yields are likely. National harvests are likely to be 15-20 percent below average.

    • Implementation of the Abyei referendum is unlikely in 2013. However, with the recent agreement to continue the flow of oil, progress towards the referendum and other elements of the Implementation Matrix is likely.  

    • The Government of Sudan has lifted fuel and cooking gas subsidies to reduce the budget deficit; simultaneous, though less significant, increases in the minimum wage are expected. Fuel prices increased about 70 percent this month. Violent demonstrations were observed in Khartoum and Wad Medani town in El Gazeira state.  


    Current Situation

    Continuation of rains through September is crucial for late-planted crops in high-productivity areas of eastern and central Sudan to mature. Effective 2013 rains started one month late in late July/early August in most parts of Sudan. In addition, the cost of agricultural inputs increased significantly (50-75 percent) this year compared to last year. Agricultural labor supply also appears to be in a structural decline with the loss of laborers from South Sudan after separation in 2011 and competition with gold mining activities. As a result, many producers in the semi-mechanized sector reduced their area planted compared to average (Figure 3). The harvest is likely to be one to two months late in these areas, extending the lean season nationwide. Harvest prospects in the lower-productivity traditional sector of North Kordofan, West Kordofan, White Nile, and some parts of Darfur are near average.   

    Sporadic tribal clashes and banditry disturbed aid operations and trade flow in Darfur. Despite numerous reconciliation agreements between conflicting tribes in Darfur, sporadic incidents of tribal clashes between Ma'aliya and Rezeighat tribesmen continued in Kaluju area of Muhajeriya locality of East Darfur.  Tribal clashes between Ma'aliya and Rezeighat since August 9, 2013, in East Darfur displaced about 134,000 people to Adila and Abu Karinka localities in East Darfur. By the end of August, most of those displaced remained inaccessible to humanitarian assistance due to security restrictions imposed by local authorities.

    Cereal prices to stabilized or slightly decreased in most markets. Sorghum prices fell by 14 percent in El Obied, 8 percent in El Fasher, and 5 percent in Nyala and Gadaref markets due to above-average trader carryover stocks from last year. Cereal prices either remained stable or slightly increased in other markets due to uncertainty of harvest prospects with the late start of season. August cereal prices were 60 - 70 percent above the five-year average and similar to or slightly above those of same period last year, a good year. Terms of trade favor livestock owners, daily laborers and firewood collectors as opposed to cereal traders.   

    The Government of Sudan lifted fuel subsidies to reduce the budget deficit. As a result, prices of cooking gas, diesel and benzene have increased by 108, 75 and 68 percent respectively in less than one week. Transportation costs increased 30 – 50 percent for staple foods to remote markets in Darfur, North Kordofan, and Red Sea States, where transport costs represent 20 – 40 percent of the retail price. Wide-scale demonstrations in Khartoum and Wad Medani town in Al Gazeira State took place during the last week of September. 


    Updated Assumptions
    • The sharp increase of fuel prices likely to increase transport costs by 30 - 50 percent. The government has proposed a simultaneous increase in the minimum wage of between 11-50 percent, which is likely to be implemented shortly. The likely impact of the fuel price increases is still under analysis.  
    • As a result of the poor performance of the season in the surplus-producing areas of the East, FEWS NET revised its national harvest expectations downwards to 15-20 percent below average. 

    Projected Outlook through December 2013

    In August most poor households in rural areas rely heavily on markets as the main source of food. However, the improved rainfall performance in August has improved demand for seasonal agricultural labor to near-average levels. Access to seasonal agricultural labor in conflict-affected areas of Darfur, South Kordofan and Blue Nile States is likely to remain below average due to prevailing insecurity conditions. The late start of season is likely to delay harvest marketing in surplus-producing areas of the East by a month or more until late October/early November. Thus, seasonal improvement of food security in areas dependant on supply from the East is not likely to occur until late October this year.

    The sharp increase of fuel prices is likely to result in an increase of 30 – 50 percent in transportation costs and an increase in the cost of production during the harvest in the semi-mechanized sector compared to last year as all large-scale farmers in this sector rely on mechanized threshing of sorghum during the harvest. Thus, some transportation and production related increase in food prices is likely in the coming months. The effect is likely to be more severe in remote areas (e.g. Darfur, Kordofan and Red Sea states), where transportation costs represent a relatively larger share (20 – 40 percent) of consumer prices.

    The highest level of acute food insecurity (IPC v2.0 Phase 4) in September is projected among IDPs in SPLM-N-controlled areas of South Kordofan State. Poor households in these areas are expected to be in IPC v2.0 Phase 3 (Crisis). Food security outcomes are expected to improve to Crisis (IPC v2.0 Phase 3) for IDPs and Stressed (IPC v2.0 Phase 2) for poor households in October with the green harvest and income from seasonal agricultural labor and cash crop sales. In areas of South Kordofan and Blue Nile controlled by the Government of Sudan, food security is relatively better due to humanitarian assistance; nevertheless, Stressed (IPC Phase 2) food insecurity is likely to persist through the end of the scenario period.

    IPC v2.0 Phase 2! (Stressed) is likely among most IDPs in Darfur during the peak lean season due to long-standing assistance sufficient to meet minimum survival food needs. However, some of the 350,000 people displaced by tribal conflict in 2013 have not yet received assistance (e.g. the 134,000 IDPs in Adila and Abu Karinka in East Darfur) and may be in IPC v2.0 Phase 3 (Crisis) until they receive assistance. 

    Figures Seasonal Calendar for a Typical Year

    Figure 1

    Seasonal Calendar for a Typical Year

    Source: FEWS NET

    Table of estimated area planted

    Figure 2

    Table of estimated area planted

    Source: FMoA&I FEWS NET and FAO joint assessment, September 2013

    Figure 2

    Source:

    This Food Security Outlook Update provides an analysis of current acute food insecurity conditions and any changes to FEWS NET's latest projection of acute food insecurity outcomes in the specified geography over the next six months. Learn more here.

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